Futures hedge ratios: a review

Optimal Hedge Ratio for Brent Oil Market; Baysian Approach

“…hedging effectiveness (equation [1]) of futures contracts. The covariance and variance errors and OHR equations are given in Table 1 and hedge effectiveness is presented in Table 2.…”

Integrated Strategic Planning of Global Production Networks and Financial Hedging under Uncertain Demands and Exchange Rates

“…Financial hedging is not considered in their analysis. In the field of finance, the use of financial instruments such as forward and option contracts hedge against exchange-rate risks has been well known for a long time (cf., e.g., Briys and Solnik 1992;Froot, Scharfstein, and Stein 1993;Broll, Wahl, and Zilcha 1999;Chen, Lee, and Shrestha 2003). However, in these works, financial hedging is typically considered as totally independent of an underlying global manufacturing and distribution network, in spite of the intuitively apparent inter-dependencies.…”

Hedging with Stock Index Options: A Mean-Extended Gini Approach

“…Furthermore, MEG allows for the introduction of risk aversion differentiation into the estimation of systematic risk (GregoryAllen and Shalit [15]). For these reasons, the MEG model has been used to estimate optimal hedge ratios in futures markets (see Lien and Tse (2002) [1] and Chen, Lee, and Shrestha, [2]). …”

“…Contrary to minimum variance, MEG hedge ratios allow the incorporation of risk aversion intensity into the hedging coefficient. A comprehensive review of futures hedge ratios and, in particular, mean-Gini hedging can be found in Lien and Tse [1], and Chen, Lee and Shrestha [2]. MEG has also been used to investigate hedging effectiveness in futures commodities contracts by Shaffer [3], in FTSE contracts by Butterworth and Holmes [4], and in currency hedging by Shaffer and DeMaskey [5].…”